The Department of Labor (DOL) has just rolled out its Final Overtime Exemptions Rule, impacting both employers and employees alike. At Mizrahi Kroub, LLP, our team of trusted New York employment lawyers is here to break down what these changes could mean for New Yorkers like you.
The final rule updates how the Fair Labor Standards Act (FLSA) determines which executive, administrative, and professional employees are exempt from minimum wage and overtime requirements.
To qualify for this exemption, an employee typically needs to meet three criteria. First, they must pass the Salary Basis Test, which means they are paid a fixed salary that doesn't change based on the quality or amount of work done. Next, the employee's salary must meet a certain minimum level, known as the Salary Level Test. Finally, the employee must perform duties that are executive, administrative, or professional, which is outlined in the Duties Test.
The new rule has raised the salary level required to meet the exemption but left the salary basis and duties tests unchanged. It also increased the threshold for highly compensated employees, who can meet a different, simplified set of requirements to be exempt from overtime and minimum wage rules.
Here's a breakdown of the current and future salary levels needed to qualify for these exemptions:
Before July 1, 2024:
- Standard Salary: $684 per week ($35,568 per year)
- Highly Compensated Employee: $107,432 per year, including at least $684 per week on a salary basis
Starting July 1, 2024:
- Standard Salary: $844 per week ($43,888 per year)
- Highly Compensated Employee: $132,964 per year, including at least $844 per week on a salary basis
Starting January 1, 2025:
- Standard Salary: $1,128 per week ($58,656 per year)
- Highly Compensated Employee: $151,164 per year, including at least $1,128 per week on a salary basis
Starting July 1, 2027, and every three years after:
- The amounts will be adjusted based on data from the U.S. Bureau of Labor Statistics.
Additionally, employers can use non-discretionary bonuses, incentive payments, and commissions to cover up to 10% of the required salary level. If, by the end of the year, these payments don't meet the required amount, the employer must make a final payment in the next pay period to reach the required level.
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